EVA and Value-Based Management: A Practical Guide to Implementation

McGraw Hill Professional, 13 .. 2000 - 493 ˹
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Economic Value Added (EVA) and Value Based Management (VBM) are todays hottest management buzzwords. But written information has often been biased and clouded by the authors hidden agendas. EVA and Value-Based Management is the first book to unflinchingly discuss the pros and cons of EVA and VBM. Covering both implementation and conceptual issues, with a strong emphasis on performance measurement, value drivers, and management compensation, it allows readers to come to their own informed conclusions.

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˹ 107 - Too many corporate managers, auditors, and analysts are participants in a game of nods and winks. In the zeal to satisfy consensus earnings estimates and project a smooth earnings path, wishful thinking may be winning the day over faithful representation. As a result, I fear that we are witnessing an erosion in the quality of earnings, and therefore, the quality of financial reporting. Managing may be giving way to manipulation; Integrity may be losing out to illusion.
˹ 6 - GATT, played an important role too, as did the gradual strengthening of the European Economic Community (later the European Community and now the European Union).
˹ 25 - This 10 per cent is a cost to the firm - formally referred to as the opportunity cost of capital. The opportunity cost of capital is the amount of income, or yield, forgone by giving up an investment in another firm.
˹ 395 - Slot at the end of this chapter for a detailed discussion of the delayed Dump and Branch instructions.
˹ 7 - Interest in stocks, and in investing generally, has grown in ways unimaginable to finance professionals as recently as the 1970s. The result is a veritable worldwide explosion in mutual funds, unit trusts, and other forms of institutional investment. Not only do many more people have a financial stake in companies, typically through mutual funds or pension funds, but of particular importance to corporate managers is that these funds are run by professional managers who care only about performance...
˹ 125 - Brian J. Hall and Jeffrey B. Liebman, "Are CEOs Really Paid Like Bureaucrats?
˹ 250 - As illustrated, the fact that the cost of debt is lower than the cost of equity is exactly offset by the increase in the cost of equity from borrowing.
˹ 17 - In the late 1980s, in response to years of mediocre performance, the company embarked on a radical change program. Operations were decentralized, with employees down to the level of site foreman sharing in project risks and rewards. The company invested heavily in training and in the development of work teams. Compensation, performance reviews, and promotion policies were also overhauled. As a result, the company's sales grew at an annual rate of more than 20 percent, and share price performance...
˹ 115 - THE MODERN CORPORATION AND PRIVATE PROPERTY by Adolf Berle and Gardiner Means.


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S. David Young, Ph.D., is a professor at INSEAD, one of the worlds leading graduate business schools. A consultant on EVA and value-based management for several American, European, and Asian companies, Dr. Youngs research has appeared in many academic and professional journals. He can be reached at david-young@insead.fr. Stephen F. OByrne is president and co-founder of Shareholder Value Advisors Inc., a consulting firm that helps companies increase shareholder value through better performance measurement, incentive compensation, and valuation analysis. Byrne is a former senior vice president at Stern Stewart & Co., and his articles have appeared in a wide variety of journals. He can be reached at sobyrne@bellatlantic.net.